Sample
Business
Plan

AfriAgric Sheep Farming|Industry Analysis

1.2
INDUSTRY
ANALYSIS

1.2.1 Industry
Overview

Sheep Farming forms
of part of
livestock farming which is a sub sector of the
Agriculture Industry of
South Africa. Livestock farming constitutes the
largest portion of the
Agricultural sector in South Africa. It is made of
about 13.8 million
and over 28.8 million sheep. These livestock are well
adapted to the
diverse climatic and environmental conditions of South
Africa.

The agricultural
industry has
experienced a number of significant changes. Notable
changes are
highlighted below:

The agricultural sector has faced increasing
deregulation
and market liberalisation since the mid-1980s

Fluctuations, particularly declines in the
foreign exchange
value of the currency and in the interest cost of
farm borrowing.
Declines in the value of the Rand have resulted in
farm input prices,
which have a relatively large import component,
rising faster than farm
output prices

Changes in tax treatment of Agriculture sector
has also
contributed to the dynamics of the Agricultural
sector. Overall changes
in Tax policy has also impacted on the
Agricultural sector particularly
when considering capital purchases

Budgetary allocations supporting White farmers
declined by
some 50 per cent between 1987 and 1993

The shifts away from settlement schemes and
large-scale
projects as the major instruments of agricultural
development in the
former homelands areas, in favour of an approach
based on the provision
of farmer support services such as infrastructure,
extension services,
research, and access to credit and markets

Furthermore, the
introduction
of the Marketing of Agricultural Produce Act of 1996
acted as a driver
for significant changes to the agriculture sector of
South Africa such
as the following:

The introduction of import tariffs. These
tariffs are
instrumental in protecting South African farmers
from unfair
international competition

The closure of agricultural marketing boards

The elimination of subsidies

The phasing out of certain import and export
controls

1.2.2
Industry
Size

There are
approximately 30
million Sheep in South Africa and these are widespread
in areas such as
Northern Cape, Eastern Cape, Western Cape, Mpumalanga
and North West.
According to livestock statistics from the Department
of Agriculture,
the figure for Sheep representing the November 2009
period was 705 532
Sheep. The Eastern Cape has the largest number of
Sheep (7 589 870),
this is followed by the Free State with 4 886 255
Sheep. Gauteng has
the lowest number of Sheep in South Africa. A pie
chart showing the
representations in terms of the population of Sheep
across the
provinces is as depicted below:

1.2.3
Growth

The number of Sheep in
South
Africa is growing steadily in response to demand,
growing awareness of
the benefits and importance of Sheep meat and skin as
well as support
for farming and businesses at large.

1.2.4
Players
in the Industry

The main players in the Sheep Farming Industry include
the following:

Subsistence sheep farmers (includes emerging
and small
scale farmers. These farmers produce for their
own personal
consumption. A few take their Sheep to the
market for sale but this is
on an occasional basis

Transporters: These transport Sheep meat and
associated
products across the value chain. They get the
products to the final
consumers

Commercial sheep farmers: These farmers
operate in a very
competitive environment as there are many in the
arena. They rear sheep
in large quantities and engage in lambing, high
level commercial
reproduction of sheep, the production of wool on
a large scale and much
more. They mostly supply their products to
Wholesalers and large scale
abattoirs

Agro processors of sheep and its by products:
These process
sheep and its products into more useful value
added form. The process
sheep skin into leather, wool into clothes, dung
into fuel or bio gas
and much more. They make use of capital
intensive equipment and
machinery. This creates a barrier of entry for
new entrants. The
specialised knowledge required to execute the
processing of sheep is
also scarce and this adds on to the barrier of
entry

Wholesaler and retailers (both domestic and
export):
Wholesalers stock Sheep products in bulk and
sale them to retailers and
final consumers

Distributors and Agents: Distributors and
agents play a
role in the market logistics of sheep and its
associated products. They
help move the products along the value chain.
They essentially get the
products for the place of production to the
wholesaler, retailers and
consumers. They act as middlemen and are
rewarded by means of
commission or a portion of the profit margins.

Food service industries: These include
caterers and other
entities that prepare Sheep meat. There is
currently competition
amongst these entities. Competition centers on
factors such as price,
quality, customer service and other variables.
Understanding the needs
and preferences of consumers and responsiveness
to dynamics in the
market is imperative to penetrating the market
as a food service
entity.

1.2.5
Key
success factors

The key success factors in the Sheep Farming sub
sector of the
Agricultural Industry encompass the following:

Attaining a high level of lamb production is a
key success
factor for any sheep entity. The fertility of
sheep is important as
this not only affects the number of lambs that
are born, but also the
time when the lambs are born. The improvement of
reproductive qualities
is therefore imperative

Skills, knowledge and competencies related to
Sheep
Husbandry are a key to success as they aid the
proper management of
Sheep farms and rearing of Sheep

The focusing on niche markets as opposed to
mass markets is
important. This is a key success factor for most
small scale and
emerging sheep farmers

Being responsive to disease outbreaks is a key
success
factor for sheep farming entities. The
consideration of controls to
avoid the spread of diseases is a key success
factor

The employment of technology to enhance the
efficiency and
effectiveness of operations

Reliability in terms of delivering the right
product to the
market at the right time and place without undue
inconvenience to the
customers

Differentiation in terms of having a unique
way of serving
the customers, having a unique brand, being
innovative and creative in
a manner that adds value to the ultimate
customers